Covid-19 has wreaked havoc on businesses around the world. That’s more than obvious. How are fresh produce businesses coping? We spoke to Tom Mahoney, CEO of RipePlanet, to gain his perspectives on the Australian situation. This interview was conducted in Apr 2020.
Let us start with getting to know you first, if you could tell our readers about RipePlanet?
RipePlanet was established within our context of dwindling natural resources, misaligned or limited access to capital for growers and a pressing need to achieve more with less. RipePlanet has invested in a collective of innovative agriculture businesses, and together they are working to set new standards of sustainable, fresh produce and systems.RipePlanet has investments across the Agri value chain, including an organisation that is bringing a plum with the highest antioxidant levels to market, growers that are looking to transition towards protected and climate-smart farming, and trade organisations that are connecting farmers with marketplaces.
How has the business been impacted over the last 3-4 weeks? How much has your daily business gone up (or down)? Are there any pockets (either type of customers or specific geographic regions) where the impact is more profound?
The last 3-4 weeks have been unusual to say the least. I’m glad that we acted early by asking our teams to work from home, prioritise their heath, and by reaching out across our collective of organisations to work together to develop contingency plans.The businesses within our collective have been impacted in different ways. All our businesses are under different and new types of pressures, but some have experienced growth that was unexpected.However, we’re realigning our businesses to prepare for things to get worse still, while continuing to prioritise our promise to their end customers.
We have seen an unusual spike in sales of fresh produce at different Category levels, with the dramatic shift from Providores sales to majority retail sales. Our view is that some of this is good, and some of this is bad. The good increase relates to more people eating at home and choosing to eat fresh and healthy foods. We hope that this positive shift remains. However, we did also observe the spike in demand for fresh produce that seems to have been driven by ‘panic’ buying. Our view is that this is detrimental. It’s not good for our communities because the more vulnerable amongst us then struggle to get access to much needed food. This sort of buying has also choked the supply chains, which has made it much more difficult to keep the shelves replenished.
We know that Australian growers face consistent challenges, and the last year was exceptionally tough for a lot of them impacted by drought and fires. And, now for Australian Exporters the logistics of global trade are challenging with very little air freight space and tight sea freight. The exchange rate however has worked positively for Exporters but not so for any importers.However, we’ve observed that the more innovative growers, for example those growing within protected glasshouse facilities, are better placed to replant and more quickly produce new yields to keep up with the increased demand, and importantly the demand for safe, clean produce.
Our organisations that work within the supply chains have also felt the impacts. They’ve had to work extra hard to source products safely – so that we can all access the food we need – while going out of their way to make sure that they’re taking all the risk out of the supply chain. This has influenced where they are choosing to source products from and has also meant that they are working overtime to really check how products are being handled at every step.On our borders, we’ve seen throughput suffer. For example, one of our entities delivers Quarantine approved logistics and biosecurity services for importers and exporters, with a focus on fresh produce. It’s another example of an essential service. However, the increased freight prices have meant that throughput volumes have significantly dropped. They’ve had to change their work practices to ramp up usage of protective equipment, change workflows to reduce handling and introduce split shifts as a contingency. Because we were able to make these changes early, the business is well placed to help take on some of the strain that domestic facing businesses are carrying as well as do more outside of fresh produce like taking on more pharmaceutical related clients
It has really been about going the extra mile to protect a stable position. We need to ensure people can eat and remain healthy. This has meant that we’ve needed to make big sacrifices by pushing back some great opportunities.For example, we are developing a farm one hour north of Sydney. This farm will produce organic fruit and vegetables. The farm will have protected horticulture, glasshouses and vertical farming on site. The growing practices will also follow the Agroecology principles so that we’re working with nature and not against her. Unfortunately, we’ve had to slow down this development so that we can redirect funds towards a “safety net”.
However, one of the organisations within our collective is looking to achieve significant market expansion by taking its 100% natural products derived from its high antioxidant plums to countries beyond Australia. We have strong demand out of China for this natural product, which could help boost your immune system, and this seems to be picking up well. This special plum is not just very tasty but has scientifically been shown to have real health benefits, which is needed right now, so the derivatives of this plum will be exported for 12 months of the year availability.At the same time we had been planning a JV in relation to supplying 100% Australian frozen fruit into retail in competition to imported frozen product from various countries. We believed this would support Australian growers marketing their entire crop and provide Australian customers with a safe and clean source of Australian product. We are proud this is coming to fruition as we speak.
We are continuing to review, share information, and remain connected. We’re not sure how things will play out but we’re really focusing on the resilience and health of our companies and each other. At the end of the day, we are a community within a community.
What are you seeing in the broader food business? How are the different stakeholders (growers, traders, food processors, supermarkets, and so on) impacted and how bad?
Beyond our immediate interest, as I touched on previously, we’ve also observed that: The food services sector has reduced very dramatically. It has been inspirational to watch how many of these organizations have changed their business models, almost overnight, whether it be by moving to home delivery or producing sanitizers As I briefly alluded to, during 2019 the climate in many parts of Australia was extreme, volatile and overall terrible for growers. We saw a farm that was lucky enough to not have been hit by the fires, to then survive an extreme week-long heat-wave that was immediately followed by a hailstorm. Each of these events can be devastating to a crop. Further, we are seeing farmers continue to struggle to get access to the funds that they need for growing new crops. All of this hurts the ability to supply much-needed food.nExporters seem to be in a challenging position. The drop in AUD seems to have been offset by the high airfreight freight prices. However, the demand for Australian produce by sea freight is extremely high. Grocery supermarkets seem to be doing extremely well, so are online meal delivery businesses.
What is the worst-case scenario (or ‘doomsday projection’) in your mind, from an overall food/agribusiness perspective?
The key focus now really is food security. Australia, a country that is luckier by design, is a net exporter of food. So, I think if we ensure funds continue to be made available to farmers and there is no breakdown in our supply chains, then food will remain available to people in Australia.We know that farmers are already operating extremely lean. For traditional farmers, it will be very difficult to take further costs out of their current businesses. They will also likely find it difficult, or at least very expensive, to purchase the various input products that they use to introduce nutrition to their soils, for example. Sustainable and regenerative farming techniques are increasingly important.
Many farmers have already felt the pressure to move towards more innovative growing models, and the impact of Covid-19 may take the choice away from them all together. We know how farms need to be transformed and we know what better principles are to follow. The key challenge has always been twofold:
1. willingness to change
2. access to the risk aligned (patient) capital to change
My view is that for many, they will understand the necessity of change in order to survive. However, I hope that we all are collectively bold and step up to the challenge of connecting our farmers to the capital that they will rely on to achieve this transformation.
You are in the B2B business. Do you see panic among these customers too (akin to some of the end customers)?
Perhaps not panic, but we know that Marketing Agents, especially those where air exports accounted for much of their business, are feeling particularly distressed as they fear that their business will cease to exist if this situation continues much longer.
There is an adjustment for the current environment, but the question is how will it look when normality returns
While the government is promising continuity of essentials, do you think the workers and shopkeepers will stay bold and continue operations and is the government providing any support?
If you tell anyone that you’re Australian, the first thing that they’ll say to you is “G’day, mate”. Our reputation for referring to each other as “mate” is key. In my view, Australia is a country that has been built with an unbreakable foundation of mateship. We are all unique, we celebrate our difference and we are a community. We also have a history of great resilience in the face of challenge. Yes, the right government interventions early, for example the Job Keepers program and the Evictions moratorium, will be critical to soften the impact of Covid-19. But our ability and willingness to look out for each other and press-on through the most difficult of times is what will see us though.
I am sure your employees are a worried lot. What steps are you taking, to ensure their safety? How are you inspiring them to continue giving their best shot?
We are all worried. None of us really know what to expect. As I mentioned earlier, we made the decision to work remotely early. This certainly helped and the fact that we were relatively digital made the transition easier but we have also worked to not let our physical distancing become an excuse to stop communicating transparently and with honesty. We have shared what we know with our team and invited them into the problem solving. While the leadership team may have more authority in the decision making, we are all equally placed to bring insights to the conversation. As a result, we were able to very quickly roll-out interventions to help mitigate the risks to our physical health, for example ensuring that all our essential workers have access to the necessary PPE equipment.Further, as a leadership team, we have decided to take significant cuts to our salary as one initiative to protect the financial health of the organisation. As a next step, we’re focussing on our mental wellbeing as a priority. We’ve kicked-off weekly team video chats, where work is off the agenda and introduced a ‘buddy’ system to make sure that we each are checking in on each other and have someone to reach out to at any time.We have set up channels for each of the above and will continue to review what we are doing and build out new ideas together..
As an organization what are the strategic steps taken to manage costs and reduce the impact on the business?
As briefly touched on before, we’ve had to make difficult choices to manage our costs and reduce the impact on the business. Key items to date include:
– making new investment opportunities dormant or significantly reducing our planned outflows
– our leadership team has taken significant cuts to their salary, for an extended period
– delaying any interest payments owed to us, to support these other entities
working with our landlords to negotiate a rental arrangement that would work for us both
Note – This is the complete, unabridged interview. A shorter version of this was originally featured on AgfunderNews.